[Market Commentary] Cryptocurrencies are crashing, but they recover quickly
Speaking of the market on May 19th (Wednesday), it is clearly all about cryptocurrencies. There was an event—the release of the Federal Reserve Board (FRB) minutes—but in the face of crypto asset volatility, even the guidance of major country’s monetary policy seemed to fade into the background. At this time the previous day, Bitcoin had already moved toward a low near $40,000. By early afternoon it fell below $40,000 and oscillated around this level, but around 7:00 PM Japan time it fell below $40,000 again and then its decline accelerated, dropping by about $10,000 in the short window from 9:30 PM to 10:00 PM, reaching around $30,000. Some crypto exchanges even saw prices dip below $30,000. Also, on several exchanges, trading processing collapsed and system failures occurred. Given that last month the all-time high was $64,800, it is a very speculative market that has fallen to less than half of that, to say the least. Bitcoin Gold fell to a low of 15 but has since recovered to 19–21. If you were trading in 1 lot, 1 point is equivalent to one unit of gold = about $1,870, so yesterday’s crash was indeed fierce.
※ Only major overseas brokersExness (minimum 0.5 lots)
On the liquidity provision of DEXs (decentralized exchanges), for example, liquidity mining involves locking up ETH and stablecoins or other tokens to earn yields, but price fluctuations are steep, and if one side’s token liquidity dries up, the lock can release and price declines accelerate. Of course, in the crypto asset derivatives market, large amounts of liquidations also caused declines to feed on themselves. Reports of regulatory tightening on Chinese financial institutions are also noted, but regarding the market’s movements themselves, please also review my thoughts in the “Market Commentary” I wrote. Bitcoin is certainly the main focus this time, but we should also watch the DeFi-related ETH drop. In March 2020, there was the so-called corona shock—an upheaval born from financial markets—but this time the drop occurred amid a boom in DeFi and NFTs, and its impact is already significant. Ether fell from around $3,200–$3,400 to below $2,000, and in the rebound it has fluctuated between $2,300 and $2,600. It has recovered for now, but if the liquidity of DEXs dries up in the future, there is a risk of a cascading collapse, which we should bear in mind.
Going forward, concerns in the crypto industry include the fact that while a collapse is not ideal, the fear is thata winter of low prices and stagnation would be unbearableand is being batted about on social media. As long as there is price movement, it can be a rise or fall for traders, but if prices don’t move, there is little anyone can do—this is true for both traders and business people involved in the blockchain industry. I hope what I explained yesterday about “When Bitcoin falls, buy immediately to target a rebound” in the context ofcontrarian trading is gradually losing its effectiveness, and I hope that this small note has been of some help.
Now, regarding the financial markets, U.S. stocks recovered in the latter part of the session and the declines narrowed. The Dow fell 0.48% from the previous day, but the Nasdaq 100 closed up 0.15%. European equities generally fell by more than 1%. The VIX fear index stood at 22.18, and the dollar index showed an uptick in the currency market. The Canadian dollar was soft. The Euro/yen gradually moved higher on a daily basis, hovering around 133. NY crude oil continued to decline due to increased supply from the U.S. and Iran, down about 3% from the previous day, making the March 8 high of 67.98 dollars seem even more distant. Grain prices fell after corn, with wheat and soybeans dropping. With the FRB minutes released, there were participants indicating that tapering discussions were about to begin, sending a signal to the market that tapering could happen sooner than expected.
【Stocks with trading appeal】
Bitcoin
Ethereum
Euro/yen
Soybeans, Wheat
【Notes on the Market Commentary】
Please consider the following points as you read.
① Whether it is transient
② Whether it is sustained
Mindset of a Trader
・Reading explanations after events is fine; it does not affect predictive ability or trading results.
・The current market movements cannot be explained in full.
・Even if the direction is unclear, it is possible to profit.
・Against markets where analysts or strategists say “it will rise,” one can profit from rebounds or adjustments.
Traders can win even without knowing market mechanics. Reports written by those like me, whose stance may differ from others who merely provide market commentary or analysis, will inevitably have some differences in stance. However, please consider it acceptable that my writing may appear similar on the surface to general market commentary.
